The Data Center Clustering Effect

It's an economic development official's data center dream scenario: one major project prompts other companies to follow, opening the floodgates for an influx of investment and high-tech jobs.

Officials in San Antonio, Texas are living the dream, as Microsoft's decision to locate a $550 million data center in the Westover Hills area has been followed by announcements of data center projects by the NSA and Stream Realty. The San Antonio Economic Development Foundation said it is working with five other companies looking at San Antonio for new data center sites, including some speculative projects.

San Antonio provides an example of data center clustering, in which a regional market becomes an aggregation point for many mission-critical facilities. This trend has usually been focused on major Internet markets (NYC, Washington, Silicon Valley) but is now providing opportunties for smaller markets (the industry phrase used to be second-tier markets) amid shifting criteria for data center site location.

Many cities are touting their attractivness for data center development, marketing their power rates, fiber infrastrucutre and available land. The challenge for secondary markets pursuing data center business is getting the first one, which creates a comfort level for other prospects. San Antonio officials have leveraged the attention generated by Microsoft's choice.

Earlier this year, Bexar County Judge Nelson Wolff Wolff and other San Antonio officials visited with NSA officials at the agency's headquarters to pitch the data center project. "We told them we were going to get Microsoft, and that really opened up their eyes," Wolff told the San Antonio Express-News. "This has gotten a lot of people's attention around the world," added Charles Wender, Westover Hills developer.

A similar phenomenon occurred in Quincy, Washington, where Microsoft's decision to build was quickly followed by data center announcements by Yahoo, Sabey Corp., Ask.com and Intuit.

It's not yet clear whether Google's site location decisions will have the same kind of coattails, given Google's penchant for secrecy and reported focus on locking up power capacity. But officials in towns that will be future homes to Googleplex data centers - towns like Lenoir, N.C.; Goose Creek, S.C.; Pryor, Oklahoma and perhaps Council Bluffs, Iowa - are certainly hoping to see the cluster effect benefit their economies as well.